Complete your VAT Reconciliation report with a conversion balance

Learn how to complete your VAT Reconciliation when your organisation has a VAT conversion balance. We'll use an example to show you how it works.

Before you start, learn how Xero builds the VAT Reconciliation report, and where the figures come from.

If you're starting a new business or have just registered for VAT, follow the process to complete your VAT Reconciliation report after you start with VAT.

Example scenario

  • Your organisation's conversion date is 1 April 2016.
  • You're on the standard VAT accrual scheme, lodging VAT returns quarterly.
  • Your last VAT Return before you converted to Xero was for the quarter ended 31 March 2016. You completed this VAT Return outside Xero.
  • You've entered your conversion balances into Xero, including the details of invoices and bills outstanding at your conversion date. Your oldest outstanding invoice or bill is dated 20 November 2015.
  • Your conversion balance for VAT is 6695.00 credit (you owe VAT to HMRC). This balance is made up of:

    • VAT on outstanding invoices $1111.49 (credit)
    • VAT on outstanding bills $903.96 (debit)
    • Other VAT outstanding $6487.47 (credit)

Follow these 4 steps to understand how the reconciliation works, using the above example.

  1. Publish your VAT Return for the period before your conversion date
  2. Run the VAT Reconciliation report to check conversion balances
  3. Complete the VAT Return after your first quarter in Xero
  4. Update your VAT Reconciliation report